Thursday, August 9, 2018

Does Setting Minimum Wages Regionally Make Any Sense?

A Don Boudreaux letter tothe Wall Street Journal:

Terri Sewell and Jim Kessler correctly argue that a one-size-fits-all national minimum wage makes no sense because different workers face different economic conditions depending on where they live (“A Better Minimum Wage,” August 9). But in calling for Uncle Sam to set minimum wages regionally rather than nationally, these authors fail to follow fully the sound logic of their argument.

Worker conditions vary not just regionally; they vary individually – from worker to worker and from job to job. While it is indeed absurd to suppose that there is a single optimal minimum wage for all low-skilled workers in both Boston and Biloxi, it is no less absurd to suppose that there is a single optimal minimum wage for all low-skilled workers in Boston and another such wage for all low-skilled workers in Biloxi. Even low-skilled workers in the same city block differ amongst themselves in their talents, experience, interests, attitudes, constraints, energy, and plans. Likewise, jobs for low-skilled workers differ in their demands, fringe benefits, and employment amenities.

The notion that politicians can set an ‘optimal’ minimum wage even for a tiny group of workers turns out to be no less fanciful than is the notion that politicians can set an ‘optimal’ minimum wage for an entire nation. Therefore, compared to having no mandated minimum wages whatsoever, even minimum wages set regionally would inevitably reduce and worsen the employment options available to low-skilled workers.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030